Demand for leased regional aircraft is “unfulfilled” and the market offers “unique opportunities” for investors, according to panel participants at the Airline Economics Growth Frontiers conference in Dublin.
During the webcasted session, Chorus Aviation Capital president Steven Ridolfi highlighted “real demand for leases in the regional aircraft space that is unfulfilled”. He says this was “what we saw in this marketplace that made us come in”.
The Canadian lessor – owned by Chorus Aviation, the parent company of Air Canada regional partner Jazz Aviation – has a fleet of 82 aircraft, including ATR and De Havilland Canada turboprops, along with Bombardier and Embraer jets.
Ridolfi describes the regional aircraft leasing market as a “niche” sector, but says it is a “pretty big niche” offering advantages as well as drawbacks. Some routes operated by regional airlines, for instance, are “essential services”, some are “protected by governments” and others act as feeder services – all of which are considered by Ridolfi to be positives.
“The future will be for those of us who can grow and meet the needs of regional airlines,” he says.
Kathleen Steven, director of structured finance at De Havilland Canada – a unit of Longview Aviation Capital which now runs the Dash 8 turboprop programme – says “demand for our product has continued to be strong”. She notes that “the regional space offers unique opportunities to investors to reach returns that are not available” in other markets.
Marcelo Santiago, managing director of customer finance at Embraer Commercial Aviation, sees potential that the leased proportion of the Brazilian manufacturer’s regional jets might grow. He points out that while around 40% of the global fleet of aircraft is leased, just 30% of Embraer’s regional jets are delivered on operating leases.
Ridolfi acknowledges that regional jet and turboprop designs tend to be “progressive as opposed to revolutionary”, but points to the assets’ longevity.
“In the regional aircraft space, we know the assets will be used for a very long period of time, assuming [there is good] manufacturer support,” he says. Although there has been a trend towards “upgauging” regional aircraft to carry more passengers, Ridolfi says this has been a “slow transition”.
According to Anne-Bart Tieleman, chief executive of regional aircraft lessor TrueNoord – which has 14 ATR aircraft – “people will always want turboprops”. He points to short runways and airports that cannot be served by larger jets.
Another advantage of the turboprop is that it is “an easy asset to transition” to different operators, and this is “clearly something that’s useful for lessors”, says Jean-Charles Buguiere, sales director leasing markets at ATR. He also cites its greater fuel efficiency versus jet aircraft.